Correlation Between Digi International and Sweetgreen

Can any of the company-specific risk be diversified away by investing in both Digi International and Sweetgreen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Digi International and Sweetgreen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Digi International and Sweetgreen, you can compare the effects of market volatilities on Digi International and Sweetgreen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Digi International with a short position of Sweetgreen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and Sweetgreen.

Diversification Opportunities for Digi International and Sweetgreen

0.43

Correlation Coefficient

Digi International  Sweetgreen

Very weak diversification

The 3 months correlation between Digi and Sweetgreen is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Sweetgreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweetgreen and Digi International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Digi International are associated (or correlated) with Sweetgreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweetgreen has no effect on the direction of Digi International i.e., Digi International and Sweetgreen go up and down completely randomly.

Pair Corralation between Digi International and Sweetgreen

Given the investment horizon of 90 days Digi International is expected to generate 0.46 times more return on investment than Sweetgreen. However, Digi International is 2.17 times less risky than Sweetgreen. It trades about -0.16 of its potential returns per unit of risk. Sweetgreen is currently generating about -0.21 per unit of risk. If you would invest  3,295  in Digi International on September 23, 2024 and sell it today you would lose (221.00) from holding Digi International or give up 6.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Digi International  vs.  Sweetgreen

Digi International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sweetgreen

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Sweetgreen is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Digi International and Sweetgreen

The main advantage of trading using opposite Digi International and Sweetgreen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International position performs unexpectedly, Sweetgreen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sweetgreen will offset losses from the drop in Sweetgreen's long position.

The idea behind Digi International and Sweetgreen pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.